Legislative Update: HEROES Act, Employee Retention Credit

September 30, 2020 – This week, House Democrats released a revised version of the HEROES Act which had passed the House in May but was never taken up by the Senate. While the original HEROES Act proposed spending $3.4 trillion in COVID-19 stimulus, the new bill lowers the amount to $2.2 trillion, mostly by shortening the timeframe for which the stimulus would apply.

The full text of the new bill can be found here.

The new bill’s changes to the PPP and employee retention credit (ERC) are nearly identical to those in the original HEROES Act. The new work opportunity tax credit target group that was introduced in the Senate’s HEALS Act is not included in the new bill.

Both the HEROES Act and the new bill propose to enhance the ERC by:

  • Allowing employers to take both PPP and ERC, but not for the same wages.
  • Increasing the amount of possible qualified wages from $10,000 for the year to $15,000 per quarter through the end of 2020.
  • Increasing the credit percentage from 50% of qualified wages to 80%.
  • Changing the “not providing services” threshold for large employers from employers with greater than 100 full-time employees to employers with greater than 1,500 employees.
  • Allowing a reduced ERC under the gross receipts test for employers with gross receipts below 90% in any quarter as compared to the same quarter in 2019 instead of below 50%. However, the lower the reduction in gross receipts, the lower the credit percentage calculation becomes.
  • These changes would be effective retroactively to the beginning of the ERC on March 13, 2020.

The new bill adds a restriction prohibiting employers from using the ERC on wages paid through government grants.

To learn more about the Employee Retention Credit, click here.

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